AGL Energy Limited (AGL):
AGL Energy and Origin Energy are being warned they face a tit-for-tat price war in their core home gas retailing markets in the eastern states if they aggressively undercut market prices in their bid to win household customers in Western Australia. AGL Energy and Origin Energy are being warned they face a tit-for-tat price war in their core home gas retailing markets in the eastern states if they aggressively undercut market prices in their bid to win household customers in Western Australia.
Australia and New Zealand Banking Group Limited (ANZ);Commonwealth Bank of Australia (CBA);National Australia Bank Limited (NAB);Westpac Banking Corporation (WBC):
Scott Morrison’s $1.5 billion a year bank tax looks small relative to the $32 billion in annual profits of the big four banks and Macquarie Group but this simplistic analysis ignores where we are in the economic cycle. When the cycle turns, and it is already showing signs of doing so, there will be an increase in bad and doubtful debts and that could impact heavily upon bank profits. Shareholders in the big four banks should think about the possibility that Morrison will take a bigger share of profits over the next five years as bad and doubtful debt charges rise. That will have implications for a number of moving parts in the investment case for bank stocks. Higher impairment charges could hit at the same time as the prudential regulator is moving to make the banks ‘‘unquestionably strong’’.
Downer EDI Limited (DOW); Spotless Group Holdings Limited (SPO):
The board of takeover target Spotless Group has resolved to push aggressively ahead with its ‘‘reset strategy’’, without any alterations, even if predator Downer EDI ends up failing in its $1.2 billion bid but then sits on the share register with a substantial minority stake. Sources told The Australian Financial Review the board helda telephone hookup on Friday afternoon to run again through the issues, including the potential scenarios and implications should Downer end up falling short in its pursuit of the company and be left sitting as a large but minority stakeholder. The prospect of Downer sitting on the share register for an extended period may become increasingly likely given the limited traction it has gained so far with its offer, which has proved unpopular with Downer’s own shareholders. Spotless chairman Garry Hounsell said on Monday in an announcement to the ASX that the move on June 2 by Downer to extend its takeover offer until the end of June and to ease conditions if it is able to reach a 50 per cent acceptance level by June 19 did not change the fundamental problem that the offer wasn’t high enough.
Myer Holdings Limited(MYR):
Myer could lose more than $10 million on its 18-month partnership with British fashion brand Topshop if a rescue package by brand owner Arcadia Group is insufficient to repay creditors. Myer not only owns 20 per cent of the Australian Topshop franchisee, Austradia, it is also an unsecured creditor to the company, which was placed into voluntary administration late last month. Sir Philp Green’s Arcadia Group, which owns the Topshop and Topman brands, is expected to take control of the Australian business and buy back all the stock and inventory as part of a working capital deal or a deed of company arrangement. However, the administrators are still negotiating with Arcadia Group over the size of the deal and it is unclear whether it will be sufficient to repay creditors in full. The major creditors are landlords, including Scentre Group, GPT Group and Vicinity Centres, Myer, which opened 17 Topshop and Topman concessions after buying a 25 per cent equity stake in Austradia in September 2015 (it was diluted to 20 per cent last year), suppliers and staff.
Rio Tinto Limited (RIO):
The next step in the clean-up of Rio Tinto’s global portfolio could and should see it surrender all hope on its endlessly disappointing partnership with Freeport McMoRan in the Indonesia copper mine in the sky, the routinely controversial Grasberg project. There is increasing speculation that Rio is negotiating an exit from a project that has cost it billions, and delivered substantially more anxiety than copper, and that might suddenly sit convenient with its Grasberg partner of 22 years, the miner’s major owner and operator, Freeport. The US miner and its host government find themselves in enduring deadlock over demands that Indonesia should assume control of the emerging nation’s biggest mining project. The government currently owns about 9.36 per cent of the project. It wants to increase that to 51 per cent over a relatively short time. But, because of the complications of the $1.3 billion production-sharing agreement it signed with Rio in 1995 Freeport is unable to commit to the ownership shift the government requires.
(Source: AiMS)
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